1996 (10) TMI 442 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Nature of the transaction of supplying additional prints (contract for sale vs. contract for work, labour, and skill).
2. Impact of the Copy Rights Act, 1957 on the transaction.
3. Ownership of the finished products.
4. Applicability of the Supreme Court decision in B.C. Kame's case to additional prints.

Issue-Wise Detailed Analysis:

1. Nature of the Transaction:
The primary issue was whether the supply of additional prints by the assessee to their customers from the negatives supplied by the customers was a contract for sale or a contract for work, labour, and skill. The Tribunal held that it was a contract for work, labour, and skill, not a contract for sale. The High Court agreed with this conclusion, emphasizing that the preparation of additional prints from negatives is a specialized job requiring skill and labour. The Court referenced the Supreme Court's decision in B.C. Kame's case, which held that the supply of prints by a photographer to his client is a contract for work and labour, not a sale of goods. The Court also noted that the additional prints were not marketable commodities and were of no use to anyone other than the customers who ordered them. Thus, the transaction was deemed a works contract.

2. Impact of the Copy Rights Act, 1957:
Although the Tribunal concluded that there could be no sale of the additional prints because the customers had the copyrights in the prints, the High Court did not find it necessary to address this question separately. The primary focus was on whether the transaction was a sale or a works contract, which was resolved in favour of the assessee.

3. Ownership of the Finished Products:
The Tribunal had concluded that the finished products were not wholly owned by the opponents (assessee), and therefore, there could be no transfer of property by way of sale in the finished prints. The High Court did not specifically address this issue separately, as it was subsumed under the primary question of the nature of the transaction.

4. Applicability of the Supreme Court Decision in B.C. Kame's Case:
The Tribunal applied the ratio of the Supreme Court decision in B.C. Kame's case to the supply of additional prints, concluding that it was a contract for work and labour. The High Court agreed, stating that the decision in B.C. Kame's case was directly applicable. The Court noted that the preparation of additional prints involved skill and labour, similar to the work of a photographer, and thus, the transaction was not a sale but a works contract.

Conclusion:
The High Court affirmed the Tribunal's decision that the supply of additional prints was a contract for work, labour, and skill, not a contract for sale. Consequently, question No. 1 was answered in the affirmative and in favour of the assessee. Questions Nos. 2, 3, and 4 were returned unanswered as they were deemed unnecessary to address given the resolution of question No. 1. The reference was disposed of without any order as to costs.